Munich Personal RePEc Archive
Principle-Agent Analysis of Technology
Project (LINCOS) in Costa Rica
Mamoon, Dawood and Hernandez, SIlvia
University of Islamabad
17 October 2017
Online at
https://mpra.ub.uni-muenchen.de/82010/
Principle-Agent Analysis of Technology Project (LINCOS) in Costa Rica
By
Dawood Mamoon
Dean and Professor
School of Management and Economics University of Islamabad
(Harvard Business School Affiliate: 2013-2017) (George Mason University Affiliate: 2016-2018) (Member World Economic Survey Expert Group)
And
Silvia Hernandez
Former Deputy Minister of National Planning and Economic Policy Government of Costa Rica, Costa Rica
Abstract:
In this paper we analyzed the institutional arrangement between various actors to
understand how ICT project objectives flow among actors in a standard LINCOS project
and how they would affect the sustainability and effectiveness of LINCOS in particular and
an ICT project in general. Since there are many actors involved in different stages and
processes of a single LINCOS project, the paper analyses the bilateral and multilateral
relationships among these actors to understand the factors that might affect the efficiency of
the ICT project. In other words the paper looks at the actors involved in a LINCOS project
in an effort to capture those circumstances under which a LINCOS project is exposed to
principal- agent problems.
1. ICT in Costa Rica
Today, when the technological revolution is transforming the lives of those who are
connected to it, the issue of access to information technology is becoming increasingly
relevant in every part of the world. Thus it is indispensable for a country to be prepared for
such changes (Human Development Report, 2001).
Costa Rica is one of the smaller Latin American countries, inhabited by only 4
million people. However, it is one of the more developed Latin American nations, known
for its social and cultural homogeneity, political stability and democratic traditions. It is also
one of the few countries in the world that does not have an army and instead, since 1949,
successive governments have channeled public resources to the improvement of general
public welfare rather than using them on amassing weaponry. Thus it is not a surprise that
today Costa Rica is one of the more developed countries among its regional counterparts,
with superior social and human development indicators (refer to table1.1) that it is definitely
a fine example to follow (Garnier 1998; Human Development Report, 2001).
Table1.1: Indicators of the Evolution of Social Development in Costa Rica 1940-2000
Indicator 1940 1950 1960 1970 1980 1990 2000
Adult Illiteracy (% of population older than 15 years old)
27.0 21.0 16.0 13.0 10.0 7.0 * 4.0 Years of Education (for more than 25 years old)
n.a. 3.1 3.6 5.3 5.9 6.5 *6.7 Life Expectancy (years)
46.9 55.6 62.5 65.4 72.6 75.6 *77.4 Infant Mortality (1000 births)
137.0 95.0 80.0 67.0 21.0 15 *10.2 Human Development Index (%)
n.a. n.a. 55.0 64.7 74.6 84.8 *79.7 n.a.: Not available.
Source: Garnier et al., 1998; *Estado de la Nación, 2004.
In the technology sphere, the country has also achieved positive technology
introductions as suggested in the 2001 Human Development Report; Costa Rica has
developed its human capital to utilize these new technologies efficiently. In effect, as the
Human Development Index shows, the country had shifted from a medium human
development level to a high one of almost 80% in the year 2000. For the same year, the
illiteracy rate was merely 4 percentage points (Garnier et al., 1998; Estado de la Nación, 2004)
Irrespective of these overall national achievements apropos economic development,
one is confronted with a different reality when inter-regional differences are taken into
account because significant inequalities prevail between urban and rural areas of Costa Rica.
Table 1.2: Percentage of School Attendance for the Population over 5 years, per Region and Sex.
Costa Rica Urban Region Rural Region Age Groups Total Men Women Men Women Men Women
5-6 years old 64.6 64.4 64.8 72.1 72.3 55.4 56.0 7-12 years old 95.7 95.5 95.9 97.3 97.5 93.3 93.8 13-19 years old 61.3 59.9 62.7 69.0 71.3 47.7 50.4 20-29 years old 22.8 21.9 23.7 28.2 29.6 12.5 14.4 30 years old and more 4.6 4.4 4.9 5.8 5.9 2.5 3.0 Source: Population Census 2000, INEC
For example, Table 1.2 shows that, out of the rural population aged between 25 and
49, more than two thirds barely have 6 years of schooling, whereas in urban areas the
corresponding figure is less than one third. One of major reasons for this situation is the fact
that people do not have enough financial resources to afford education (refer to graph 1)
(Estado de la Nación, 2000:87). One way to make education accessible to the rural poor is to
make it cheaper and efficient by utilizing ‘new’ technologies.
Graph 1: Various Causes of Non-School Attendance of the Population between 5
and 17 years of age.
Ne e ds to work Proble ms to acce ss e ducation syste m C annot pay studie s Doe s not want to study
Se e studie s as to difficult
There is a greater need of technologies that can provide access to information,
especially in the rural areas, and to reduce the digital divide.1 Information and
Communication Technologies (ICTs) can be identified as such technologies which, under
the right conditions (for example, effective use of it and equal access to it), can not only
improve the skills of the targeted population through better knowledge but also enable them
to have better income opportunities (Schech 2002; Rodriguez 2001; Colle 2000; Escobar
1995).
However, rural areas generally lack easy access to these Information and
Communication Technologies (ICTs) because of complex conditions. For example, because
of their remote geographical locations most rural areas have poor infrastructure, which
makes it difficult for the availability of ICTs (Okot-Uma, 1992 cited by Ghimire, 1997).
Therefore ICT provision to rural areas is generally a challenge and a tough task. But it is
necessary to take up this challenge because ICTs are cheaper and efficient modes of
knowledge dissemination, and this is a pre-requisite for the improvement in rural livelihoods.
Yet, the provision of ICTs generally involves many actors and as a result quite many
processes. These actors can be the State, a Northern NGO, a Southern NGO or both
and/or local communities, and these actors interact with each other at various stages of a
standard ICT project. In an effort to identify the most efficient ways of ICT provision, one
has to critically evaluate the role of these actors individually and/or in a group. For example,
it is imperative to know how different intermediaries2 as non-governmental organizations
(NGOs) come into action to play a role in the transfer of technology by implementing ICT
projects that can facilitate the access to various technology tools in areas where technology
introduction is difficult (Colle 2000).
This paper intends to look at one such intermediary NGO in Costa Rica, namely the
Costa Rican Foundation for Sustainable Development (CRFSD). This Foundation is an idea
of the former president of Costa Rica, Jose María Figueres Olsen who initiated an ICT
project called ‘the Little Intelligent Communities’ (LINCOS). CRFSD has also involved
various national and international aid agencies /donors in the promotion of its project.
1Is a shorthand term used to describe the widening gap between those who have access to a computer and
internet and those who do not (Microsoft Melinda Found, 2004)
2 There are different likes and dislikes for what an intermediary organization can be (Carroll, 1992:9)
As a result, the CRFSD has to go through different steps before each LINCOS
project is finally implemented and considered ready for its use by the targeted population.
These steps form the project chain, which covers all the processes that a project has to deal
with, making up for the complete institutional arrangement whereby different relationships
and interests are covered and roles of different actors involved are identified.
The major focus of the study is to identify relationships between the various actors
involved in a standard LINCOS project and the way in which those relationships may have
influenced the efficiency of the project by looking at all the actors involved and the course of
actions taken by them.
There are ‘hard’ factors or material infrastructure requirements (e.g. components of
electricity, hardware and software platforms) to provide access to ICTs, and there is also a
need for the so-called ‘soft’ infrastructure (e.g. financial and negotiation factors) to support
the diffusion and the use of these technologies (Chepaitis 2002). This paper centers its
attention on the soft factors, which construct the institutional arrangement and, in particular,
it examines the relationship between the different actors involved in the ICT project. 3
For a better understanding, a graphic representation of the ICT project chain is
presented in figure 1 in appendix A. The chain provides a general overview of different
actors and processes involved in every step of the ICT project. Following the steps identified
in this ICT project chain, the paper attempts to show if the different actors are meeting the
project’s objectives and if they all have same objectives. This will also provide us with the
information to know how every step has defined the actual purpose of the project, even
though the purpose may be officially the same.
In this chain analysis, the paper seeks to identify the role played by the actors, giving
special emphasis to the NGO (CRFSD) and its relationships with the donors4, State5 and
3 Indicating ways of negotiations among actors. For studies of these soft factors such as negotiation
behaviors, see Schechter1998 and Solomon 1999).
4 Within this donors’ classification the paper will include: national and international foundations, private
with the LINCOS’ management membership based organization (MBO). To this end, we
can consider the positive connotations and different problems that arise from different
actors’ interventions. Such an approach will help me to identify if some actors can lead to
the creation of new relationships of dependency, where some of them may have more power
to take decisions and impose conditionality on the others.
Since it is anticipated that (as it is the case now) the majority of the world’s rural population
will not own ICTs in the near future and most will probably not be direct users of ICTs -
many countries are trying to reverse such trends. ICTs are identified as an important means
of sustainable development and efficiency in communities - be they rural or urban.
To this effect, in many developing countries, a wide range of organizations –national
and international- are promoting and supporting the creation of entities that can make ICTs
available on an affordable basis to everyone. Much of this attention is now on “NGOs and
their initiatives toward applying ICTs and telecenters toward development” (Colle 2000:4).
In this paper, evaluation of the CRFSD as one of those intermediary entities, and the
analysis of its ICT project is used to understand what steps are involved in a project before
people get access to it. As mentioned earlier, an ICT project entails a chain of different steps
and actors before its outputs reach recipients. The analysis of any such steps that allow the
information to flow from a ‘top’ initiative idea to the ‘bottom’- to hitherto disconnected
people - provides a useful framework for any efficient ICT project implementation. Such an
approach gives an understanding of the processes that may delay or accelerate the ICT
connectivity to the rural people.
In short, ICT projects are worth analyzing to understand the institutional
arrangement that lies behind them, especially since the analysis of such partnerships and
relationships in ICT projects have not been covered extensively by the existing literature
(Brehm 2001).
5 The difference between state and government is well known, however for the present paper the two terms
It was possible for me to gather good background knowledge about my case study as
I have been working with the CFRSD. It has been both a challenge and a moving learning
exercise to explore the relationships between the NGO and the donors, the state and the
community management based organization (MBO) as actors involved in LINCOS.
The objectives of this study are to:
a) Identify those steps in the structure of the project that may delay or accelerate the
access of information to the targeted population;
b) Analyze the NGO objectives in relation to those of its partners, donors, State and
the community organization (MBO) involved. (Does everybody want the same
thing? Do objectives of the NGO clash with those of the donors and do these
differences influence the objectives of the NGO? How are actors influencing the
project?)
This research seeks to examine some of the factors thatmay inhibit or foster access to ICTs.
There will be a further focus on other specific sub-questions:
a) How do objectives of the ICT project flow among the actors and why? (What
happens at the end of this process?
b) What factors in the institutional arrangement account for the delay or progress of the
ICT project and why? (How long does it take, what does it mean in terms of time
and why? i.e. contract agreements, requirements, etc)
c) Are changes in the project, if any, caused because the presence or absence of particular actor/s (i.e., donors/state)?
2. Methodology
This study is based mainly on secondary data to illustrate the case of the steps
involved behind an ICT project and its analysis with a principal-agent perspective.6
Principal-agent theory is been chosen because it can identify different relationships among
actors involved (Stiglitz 1998). Whereas, the role of these actors may depend on who sets up
the rules and which one is willing to accept them. As a result, sometimes the interests of a
principal (the donors) can influence the interests/objectives of the agent (NGOs). This is
because there may be uneven situations of information from one actor to the other (Stiglitz
1998). It is therefore important to look at the objectives of the project to understand if they
match with the interests of the particular actors involved.
Principal-agent theory also helps to understand the role of each actor, shedding light
on the reasons why their objectives are similar or different. There can also be the case
(depending on the circumstances) that an actor that is playing the role of a principal becomes
the agent for another actor and similarly the agent becomes the principal for another actor.
Such a situation will most probably arise while moving down to another stage on the ICT
chain. In short, by using principal-agent methodology, the paper tries to analyze whether the
original objective of any ICT project changes because of the actions taken by different actors
in different stages.
The secondary data for the analysis has been collected through literature review from
websites and library materials in the Netherlands. The case study was assessed on the basis
of published and unpublished reports, articles, and other material from the studied NGO.
Also, some primary data was gathered by interviews and email communications with the
main actors involved in the project, by arranged contact from the NGO.
Since the study concentrates on the soft structure of information access of an ICT
project, it does not look at the impact of this project in the communities. Therefore, the
paper does not pay major attention to the positions of the communities or the beneficiaries’
reaction and the way they will make use of the information and communication
technologies. Rather, it focuses on the ways in which these ICT services are provided to the
people that need the information in the shortest possible time that facilitates the service
delivery.7 Looking at the way actors operate will assess this service delivery. Therefore, this
research will also be of help for anyone interested in the role of the actors behind any NGO
project.
Since this work is based mainly on secondary data with the use of the CRFSD
project’ files, it is imperative to acknowledge that I myself did not participate in the process
of the material creation, which may lead me to diverse conclusion problems. Also, there is
always the possibility of not having access to some information, even though all the previous
negotiation was carried out. The key concepts of the study are: Information and
7 “Providing a service is just the starting point in a chain of events that should ultimately end in an increase
Communication Technologies (ICTs), Non-Governmental Organizations (NGOs) -as the
ICTs performer of the presented case- and their relationships with Donors, State, and
MBOs. This is evaluated with a Principal-Agent Theory Analysis.
3. Defining Information and Communication Technologies (ICTs) through Literature
“ICT encompass all those technologies that enable the handling of information and
facilitate different forms of communication among human actors, between human beings
and electronic systems, and among electronic systems” (Hamelink, 1997:3). This technology
‘reflects the convergence of digital computing and telecommunications’ (Heeks 2002:1),
which are the means to serve the goals of the information handling and communication.
Different ‘old’ and ‘new’ devices for the information delivery such as computer, radio, and
telephones among others, can hold the use of this technology.
It is widely believed that ICTs are a means to enhance people’s well-being (Heeks
2002; Schech 2002; Colombo 1989). This public welfare is achieved through knowledge
sharing that enables people to improve their skills as a means for empowerment. This
empowerment extends opportunities for employment, which will improve their life
conditions. Evidence indicates that ‘ICTs can be highly beneficial to individual communities,
projects and countries as under the right circumstances ICTs can improve education, health,
job creation, governance and other services’ (Rodriguez 2000:5).
However, merely acknowledging that information can provide many opportunities
for those who need it is not enough. This information should be provided as effectively as
possible. There is the belief that for an effective usage of ICTs, the question of digital divide
has to be addressed by incurring extensive investment in the ICT infrastructure. The second
critical step is to shift from learning to ‘learning-to-learn’, as in the age of modern ICTs,
most information is on-line, and what is really required is the skill to know what to look for,
how to retrieve it, how to process it and how to use it, thus transforming information into
knowledge and knowledge into action (Castells 2001). Only after such actions, which lead to
the provision and optimal utilization of ICTs, can it be said that information technology
causes social well-being.
Yet, this involves many underlying assumptions. The most vulnerable set of assumptions
technology should not only be equally available to the people from all the stratum of income,
but that they are also well capable of utilizing it. These assumptions do not hold in reality.
Firstly, there is an enormous and augmenting partition between the have and have not of
ICT infrastructure. As Saith so aptly states:
“The empirical evidence, revised as it is continuously in order to keep track of a fast moving target, all
confirm the existence of a chiasmic divide: this applies to the different elements of ICTs; and then for
comparisons between continental regions; within advanced and poor economies; within each country to
the enormous gaps between rural and urban populations; within urban regions to wide divide between
the megapolitan centres and large cities on the one hand and the small towns on the other; within cities
to the different categories of suburbs that house different social groups” (2001:4).
Thus, there is a clear case of digital divide between and within countries and where
variations of the wealth distribution are noticeably from rural to urban, which hampers the
effectiveness of ICTs (Castells 2001; Colle 2000).
Additionally, illiteracy problems and social discrimination prevailing in societies limit the
use of ICTs even where they are made accessible to a common person: ‘Since ICT skills are
largely based on literacy, it seems that the vast majority of the illiterate population which are
largely poor will be excluded from the emerging knowledge societies, whereas the worse
shall be women who constitute the major chunk of illiterates in the world’ (Hamelink 2000:
iii).
Here then, the question that arises is why there is still a profound gap between technology
needs and availability in rural areas? How can ICTs fill the gap in those deficit areas? These
questions lead to a major concern with who is implementing ICTs and in what way it is
implemented? Since it may be the case that, despite good intentions regarding a project,
some actors are not playing properly their role.
To this effect, in order to examine the ways in which ICTs can be delivered to people,
one has to look at the role of the different intermediaries that play a crucial role in its service
delivery strategy. These intermediaries can be broadly identified as NGOs, Donors and the
State. Before analyzing the role of these actors in ICT development, it is useful to first
how these actors are linked with each other in an institutional framework for the promotion
and implementation of a development project.
3.1. What are Non-Governmental Organizations (NGOs)?
According to many authors, NGOs have become important actors in the last
decades (Biekart 1999; Edwards and Fowler 2002; Carroll 1992; Korten 1990; Padrón 1982,
Macdonald 1997; Smillie 1995; Thomas and Allen 2000) serving as intermediaries for donor
agencies and governments by having a strong presence in needy communities around the
world.
It is important when analyzing NGOs to understand how accountable they can be to
the people they are helping. However, a critical definition of NGOs and their distinctions
must be presented first.
It is difficult to find an adequate definition of NGOs. They embrace also many
different organizations ranging from “political action committees to sport clubs” (Carroll
1992:9).
Therefore, a special distinction of NGOs is made between those organizations
performing developmental assistance and those involved with social commitment in
“grassroots work”. The former are grassroots support organizations (GSO), which are
NGOs providing assistance to different communities as intermediary agencies (Carroll
1992:9). For some authors, these organizations are also known as non-governmental
development organizations (NGDO), which are also within the NGOs category but with an
attitude more towards development (Padrón 1982).
Grassroots organizations (GRO) on the other hand are NGOs that are not working at
the supra regional level as GSO. They are only concerned with their own community
assistance, thus seen as community organizations (Arrosi et al. 1999) or ‘peoples’
organizations’ (Korten 1990). Within these GROs there are grassroots based organizations
(GBOs) and membership organizations (MO) (i.e. member based organizations (MBOs),
whereas the main differences between this group and the GSO lies in the way they gain their
support and their accountability structures. GRO followers also call them self-help groups,
since they are entities that gather their results by making use of their own resources and by
…any action undertaken by an individual or group of persons, which aims at the satisfaction of
individual or collective needs or aspirations. The distinctive feature of a self-help initiative or activity is
the substantial contribution made from the individual’s or group’s own resources in terms of labor,
capital, land and /or entrepreneurial skills…a self-help group is also a membership organization which
implies that its risk, costs and benefits are shared among its members on an equitable basis and that its
leadership and /or manager liable to be called to account by membership for their deeds’(1994:45).
There are a wide variety of classifications according to the nature of entity; NGOs
can also be grouped as northern governmental organization (NNGO) or southern
non-governmental organization (SNGO) depending on their headquarters’ location or from
where the assistance is coming from (Bebbington and Farrington 1991 in Bebbington et al.
1993:6).
Furthermore as the term indicates, non-governmental organizations are not entities
from government, though in reality many NGOs receive funds mainly from them (Thomas
and Allen 2000:210). They become contractors and not independent actors, since most are
not financially self-sufficient but in need of resources. The same situation is seen with
donors and NGO relationships. NGOs have been acting as intermediaries in developing
countries where government or donor funds are available, becoming implementing agencies
for big donors in the aid chain (Biekart 1999:38-40).
Apart from understanding the typology of NGOs, an evaluation of their work
should be offered since there are many examples that can be attributed as positive and
negative effects from the work of NGOs.
NGOs aim to alleviate problems present in the majority of developing countries,
especially in rural development (OECD 1998). Even though these problems can be
attributed to different circumstances, NGOs have developed different networks to improve
any existing situation. Today, their work is concentrated in the help they can provide to
community development. This assistance can be direct or indirect by providing resources
that were lost by natural disasters or by the introduction and implementation of projects to
impact a large range number of people. Also, communities are relying on them to gain access
to resources because of the lobbing capacity that many NGOs have, (Riddell and Robinson
1995).
However, in the majority of cases these NGOs’ projects are pre-designed and
cases NGOs act as intermediaries to northern organizations or donors that want to utilize
the same project models in south countries. Hence, the project may not have positive
impacts (such as local ownership) because of different characteristics and necessities of the
place where it will be implemented as compare with the one where it was first set. As a
result, different situations such as cultural and political factors can show the disapproval of
some NGOs’ work (Rozendal 2003). Besides, many times project developers are not
considering other aspects such as remunerations schemes, which have negative aspects when
leaving apart. As Riddell and Robinson suggests “well-trained field staff, motivated by a
reasonable level of remuneration and committed to the goals of the organization, clearly play
a critical role in successful interventions…poorly paid staff have cause to be less committed
to the projects they are managing or executing, and will be tempted to spend more project
time engaged in moonlighting activities” (1995:71). Finally and in contrast, projects should
not leave behind the idea that “too many staff will have objectives that are too broad and
shallow” (Heeks & Baark, 1998:26).
Consequently, for a better perception there should also be an assessment on NGOs
accountability.8 Here, the question is to whom NGOs are accountable? Are they
accountable to their partners, to the communities they target, to donors, to governments, or
to the coordination bodies in which they participate? To some extent they are accountable to
all of them, but the unequal power relations they engage in must be acknowledged (Carusi
2003:11). As Thomas and Allen have stated, “NGOs are in practice more accountable to
their donors than they are to the beneficiaries” (2000:213). Biekart (1999) also argues that in
the aid chain the most powerful actors are donors (i.e. northern governments) at the top of
the aid chain and they control strategic decisions in the negotiation process.
INTRAC work describes this accountability issue by pointing out their concerns for the
way in which, some local NGOs are being held accountable by communities:
“After initial enthusiasm for supporting local NGOs as intermediaries to empower the popular
organizations of Civil Society, questions are now being asked about their accountability to these
organizations. Might they even weaken Civil Society? Have we witnessed a disproportionate support for
local NGOs at the expense of popular organizations…making the latter dependent on local NGOs as
intermediaries for access to resources? Local NGOs increasingly tend to present popular organizations
8 “Accountability is understood as the degree to which members (or citizens) can hold their leaders (or
in policy discussions with donors and, in turn, have attached a professional middle-class cadre of
‘experts’. By funding and promoting local NGOs, are we in danger not only of encouraging
opportunism but also of undermining even the more productive role that government might play in
developing countries?” (Bennett and Gibbs 1996:4).
On the whole,NGOs’ ties to some actors may lead them to different priorities where the
course of projects get changed or interrupted. Hence, this difference of priorities that may
be present in the institutional arrangement is what calls for the analysis of the relationships
among different actors.
3.2. NGOs, State and Donors: An Overview
After going through the above analysis, in this paper NGO refers to organizations
that engage in providing support to different communities. Therefore, the Costa Rica
Foundation for Sustainable Development (CRFSD) refers to a grassroots support
organization (GSO) or Southern NGO (SNGO), and the LINCOS community
administrative organization is referred to GRO, or MBO definition.
After the end of cold war, bilateral and multilateral lending agencies have pursued a
so- called ‘New Policy Agenda9’ that identifies NGOs such as GROs as one of the most
prominent means for poverty alleviation, social welfare, democratization and healthy civil
society. They are also considered to be key channels for the promotion of pluralism and
human rights protection.
At the same time, the developing country states are viewed by these aid agencies as
generally lacking resources or commitment to ensure universal coverage of social welfare for
the public. Furthermore, the state’ failures are attributed to their interventionist policies. For
example, in ‘rural development projects’, the tendency for state institutions to centralize
decision-making led to growing classes of urban-based functionaries, hierarchical decision
making and so reduced flexibility and responsiveness and to inappropriate and slow program
implementation at local level (Ahmad 2000:15). In short, there are state failures in many
developing countries due to an inefficient allocation of resources at national level, and
particularly to rural and urban sectors and private and public sectors. In view of the good
history of NGOs in providing welfare services to the poor people in those countries where
9 ‘New Policy Agenda’ is term coined by Robinson (1993) whose beliefs are based on neo-liberal
governments failed to ensure universal coverage in health, education and security, the new
liberal paradigm has scrapped the Keynesian model of development where the state and its
agencies were assumed to be the key vehicles through which projects and policies were
implemented.
Traditionally, donor finance has been channeled into various development projects
through NNGOs. However, this trend is increasingly changing as the SNGOs’ competence
and capacity is improving. Now, SNGOs increasingly receive funds from many different
sources including NNGO partners, international foundations and official bilateral and
multilateral donors, whereas donors also support SNGOs indirectly through NNGOs. The
change of focus from NNGOs to SNGOs is also due to the fact that this arrangement suits
both donors and the developing country state. Donors prefer SNGOs because they are
assumed to be more accountable, better performers, and more effective in strengthening
civil society in the South than their Northern counterparts (Bebbington and Riddell 1994).
In the case of NNGOs, the developing country state does not have much leverage to
address these concerns and might consider their actions a threat to its legitimacy or
sovereignty. Many NNGOs look to influence southern state policies through operational
collaboration, lobbying and advocacy. On the other hand, a range of interventions can be
used by the state to influence indigenous NGOs in the South. They can involve restrictive
measures like investigation and coordination, deregistration or even closure or they can
provide incentives like tax exemption status, access to policy makers and public funding
(Hulme and Edwards 1997).
3.3. Conceptualizing Institutional Arrangement between NGOs, State, GRO/MBOs and Donors
The role of NGOs in economic and social development cannot be understood
without taking into account the nature of their relationship with other actors that participate
in the non-governmental social development initiative. This paper identifies these actors as
the developing country state, donors (including NNGOs), NGOs (including SNGOs or
GSOs) and GROs (including MBOs).
Figure 2 below shows the direction of the relationship between these actors and the
kind of control or influence each of them can have on others. First, it should be recognized
that though actors may work together, their objectives can vary and that one actor might
categorized as some officially stated goal like poverty alleviation and national economic
development or there can be some hidden agenda like access to foreign markets or simply to
influence another actor through persuasion, financial inducement or direct coercion (Hulme
and Edwards 1997).
Figure 2: Actors Relationships
Donors Developing Country State
Southern NGO
(Grassroot Support Organization)
3.4.1. NGO and Donors Relationship
For example, in the case of the NGO-donors relationship, the donor’s objective can
vary according to its orientation. In the context of this paper, donors can be categorized into
three groups: (a) private enterprises, (b) multilateral or bilateral aid agencies or foundations
and (c) academic institutions. The objective of private enterprises can be to access the
foreign market, whereas aid agencies and academic institutions would normally work for
certain development goals identified in neo-liberal economics. They collude to participate in
NGO activity in the developing country by providing finance, technical assistance (i.e.,
exchange visits) or other material resources irrespective of differentiation in their goals
(Hulme and Edwards 1997:7-8; Riddell and Robinson 1995:67).
3.4.2. NGO and State Relationship
Here, donor initiatives force developing country states to participate in an NGO
activity to ensure state legitimacy is not weakened. According to Farrington and Bebbington
(1993), if anything, State and NGOs are ‘reluctant partners’. This seems to be the case in
many countries, but in many instances the relationships are more complex and prone to
extreme variations. For example, Bratton (1989) argues that African States have generally
adopted a control-oriented approach towards NGOs. In Kenya, the State is more concerned
with larger NGOs present in cities and undertaking urban programs whereas smaller NGOs
working in remoter rural areas and are allowed to operate with a much higher degree of
‘autonomy’ as they do not threaten the state (Anangwe 1995). Though in some other
countries the state appears to be more flexible, this flexibility is due to the preferences of
specific regimes (Perera and Wanigaratne cited by Hulme and Edwards 1997). So, State and
NGO relationships are case sensitive and call for a more detailed case study analysis to
understand how states envisage different NGOs.
3.4.3. NGO and GRO/MBO Relationship
The basis of the NGO and GRO relationship comes with the choices NGOs face in
project implementation. It is up to the NGO whether it wants to involve itself directly with
individual households or to channel its programs through GROs, which make up for more
efficient links to the poor. In the case of SNGOs in particular, the choice of GRO root
community-based organizations (CBO) according to a standard format, which these SNGOs
believe it optimal because “it facilitates mass outreach and helps reduce administrative costs”
(Hulme and Edwards 1997:15).
However, irrespective of their operational preferences for optimal outcomes,
Hashemi (1995) believes that the only way for NGOs to be more relevant to the poor is if
they become accountable to those for whose welfare they are working. This is quite
contrasting with the general practice where NGOs are seen to be more accountable to their
donors or for that matter, the state. In short, to be efficient, “NGOs have to make a choice;
between the four wheel drive vehicle that comes with government licensing and donor
funding, and the much harder conditions involved in living along side poor people”
(Hashemi 1995, quoted by Hulme and Edwards 1997:15). To this effect, ‘the question
whether [NGOs or to this matter SNGOs or GSOs] are concentrating on their linkages to
states and donors to such degree that their relationships with the poor are being eroded
remains the most critical one’ (ibid). This question will form the basis of our analysis in and
the paper will discuss the case of the SNGO under investigation ‘CRFSD’, which is also
involved with other actors creating an institutional interdependence.
3.5. Principal-Agent Theory: The Research Method
Today principal-agent theory has seen practical application in nearly every area of
social science. It captures the dynamics of a relationship between two entities, two
individuals or two parties where one is recognized as an agent because he/she is expected to
perform certain duties identified by his/her principal who is bound to keep part of the
commitment towards the agent (Halachmi 2003). For example, in the developing world, institutions like non-governmental organizations (NGOs) can be agents of autonomous
funding institutions like the World Bank or IMF or public funding agencies like government
banks or they can be agents of multinationals donors. In short, an agent is employed to act
on behalf of another called his principal, so that as a rule the principal him/herself becomes
bound.
However, there is a caveat: According to Halachmi (2003), it is impossible to observe
all actions and decisions of the agent or to infer them by observing the outcomes of agent’s
decision. This leads to a principal agent problem, which arises because of imperfect
information constraints, either concerning what action the agent has undertaken or should
3.5.1. Principal Agent Problems: Moral Hazard and Adverse Selection
It is customary to distinguish two types of informational constraints in
principal-agent theory: moral hazard and adverse selection. Moral hazard refers to endogenous
variables that are not observed by the principal. Stiglitz (1998) defines moral hazard crudely
through credit relationships between lenders and borrowers. According to him, in credit
relationships moral hazard arises when the actions of the borrower can affect the probability
of default. Laffont and Tirole explain moral hazard as discretionary actions of actors (i.e.,
NGO) that affect the cost or quality of their project. These discretionary actions can be
allocation of perks by the managers (hiring personnel to lighten their work loads, inattention
to excessive inventories of inputs, etc), indulgence in activities that privilege their career
potential over efficiency, purchase of materials and equipment at high prices are a few of the
negative efforts arising from moral hazard. Adverse selection arises when an agent has more
information about exogenous variables than the principal. In general adverse selection allows
the agent to extract a rent from interaction with the principal even if his/her bargaining
power is low. Laffont and Tirole (1993) explain that an actor (State, Donor or NGO) is
faced by adverse selection when it is only known to the MBO or the community whether its
cost for a given level of cost reducing activity is high or low. Since a regulator, who must
ensure that the MBO supply certain services, must also guarantee that the MBO is willing to
participate in implementation and execution of the project (even if it faces intrinsically high
costs), the MBO must enjoy non-negative rent even if the project they are working in is
inefficient. This leads to the possibility of adverse selection as the MBO could lower its
cost-reducing activity below the socially optimal level and produce at a high cost that would have
been its cost has it been inefficient. This slack provides the MBO with more utility that it
would have had, had it been inefficient, and hence with a strictly positive rent.
4. Setting the Scene: An ICT Experience in Costa Rica 4.1. LINCOS---A Project Description
As discussed earlier, a series of initiatives related to the application of ICTs has been
initiated in Costa Rica with the idea of introducing the use of communication technologies
Entebbe)in partnership with Massachusetts Institute of Technology (MIT) and the Costa
Rica Institute of Technology (ITCR) initiated the LINCOS program in 1998.
CRFSD was created as a non-profit organization, in 1993. Today, is mission is ‘to
promote the use of technology applications that enhance peoples’ well-being, within a
framework of Sustainable Development’ (CRFSD 2004).
LINCOS is a project meant primarily for the poorest marginal urban communities
and rural areas, which, according to CRFSD, are the main locations that do not have access
to technology platforms and other basic technology infrastructures (LINCOS [Multimedia]
2000). The LINCOS project involves the installation of a services unit, which works as a
telecenter10 with multiple applications available to its target beneficiaries that are children,
adults, small and medium size farmer’s producers, local small business, medical patients
among others, whereas in full operation LINCOS could service over 4,000 people per
month. (LINCOS [Multimedia], 2000).
This LINCOS units’ structural design consists of a used shipping container -
disposed of by a shipping company - that is about 20 feet long and 9 feet wide with a canopy
added on top to provide shade and water protection. It is modified with doors and windows
and normally configured with six computer stations and a small ‘laboratory’ inside (see
appendix B for drawings). According to CRFSD, this container box and its size were
selected because of ‘its convenience, security, and portability,’ by minimizing the
environmental impact and benefiting communities where it gets permanently installed
(LINCOS 2004). However, in 2003 CRFSD decided together with the Digital Nations
Consortium11 to change their focus on containers by taking LINCOS to second-generation
phase following a permanent evolution strategy whereby the project services can be placed if
the community so wants by using: a community center, school (not necessarily recyclable
containers) in an effort to focus mainly on community and educational aspects (LINCOS
2004).
10 “The Telecentres consist of a physical infrastructure that allows the access to the information and
communication services by connectivity” (Gómez et al., quoted in Tschang, 2002: 130).
There are different types of telecenters, one of those are the multipurpose ones as LINCOS, which can provide a wide range of applications (ranging from telephony to internet connectivity) for individual, social and economic development. It is important to acknowledge that according to CRFSD, LINCOS differs from telecenters in some aspects, but for the purpose of this paper LINCOS is going to be assessed as a telecenter to facilitate the understanding of its concept.
4.2. Project Dimensions:
Currently, the LINCOS project is no longer a pilot project and has already been
introduced in two Latin American countries (Costa Rica and the Dominican Republic) with a
total number of 18 units working in different rural communities. For example, three units
have been set up in three different rural locations of Costa Rica12, and the rest have been
located since 2000 in 15 different rural communities of the Dominican Republic.
In the case of Costa Rica, LINCOS projects have been implemented through donor
initiatives, while in Dominican Republic they have been implemented through the national
government.
LINCOS units are capable of attending the needs of over 4,000 inhabitants per
month,13 providing them various services.The following table gives the average capacity of a
LINCOS unit for the various services it offers, per week, per month and/or per year.
Table 4.1: Capacity of one LINCOS unit
Type of Service Offered Quantity of People Attended/Unit
Per week Per month Per Year
Educational computers to girls and boys between the ages of 7 an 14
240 1008 12,096
Educational Information Systems for people 15 years old and older
174 731 8,772
Lab services use for Educational Information Systems 59 248 2,974
Information Window and community services 65 260 3,120
Soil and Water studies -- 20 * 240
Teleconferences 560 ** 2352 28,224
Total per Unit 1.098 4,829 77,448
Note:
*/ It is estimated that the service can be offered to five persons per week
**/ There is a 40 persons capacity for the video conferences, twice a day, seven days a week Source: Lincos web site. www.Lincos.net
The table shows that a standard LINCOS unit makes available various ICT-oriented
services (banking, trade, local agriculture information, etc) to an average of 1,739 inhabitants
per month, including school students as well as adult population living in or near the
community where the project is introduced.
12 - San Marcos de Tarrazú community (Southern Region-Rural), 2000.
- San Joaquín de Cutris, San Carlos (Northern Region- Rural), 2001. - Río Frío (Atlantic Region –Rural), 2002.
13 This capacity is set as a reference by CRFSD as result of LINCOS historical information in communities
On average, LINCOS can also perform 20 soil and water studies per month, which
can be utilized for myriad of purposes, i.e., early disease detection and sickness control or
better agricultural practices. Last but not least, LINCOS also contain a teleconference and
entertainment component which generally serve a group of 40 people, twice a day, seven
days a week. This enhances cultural levels, creates ‘new’ forms of entertainment and help,
giving the possibility of communicating with the world (CRFSD 2004).
4.3 Steps and Processes to Deploy LINCOS Units.
Implementing this project, involves various steps that correspond to the execution of
a LINCOS unit in a community. These steps and processes are the ones constructing the
chain under analysis (see Figure 1, in appendix A) and they are outlined as following in detail.
Step 1: Introduction of the Project Process 1: Overall Assessment.
LINCOS was the brainchild of CRFSD where the original objectives of the project
were set up. When the idea was still on paper, CRFSD initiated contacts with donors and
government officials of the participant countries where the project was to be implemented.
National evaluation/surveys were undertaken to establish economic, social, technological,
cultural educational and environmental conditions. At this stage, every community that
might potentially participate in the project was identified.
Process 2: Community Assessment and Selection.
This activity involved evaluation/surveys to identify the communities where the
LINCOS units could be fully integrated. Each community that could benefit from the
project needed to fulfill a range of requirements and responsibilities. Once these
requirements were met, CRFSD together with Rochester University would proceed with the
elaboration of the community assessment or Rapid Assessment Process14 (RAP), carried out
in participation with the different actors in the community, with the idea of creating a
strategic and operative work plan for the project’s implementation. Thus, “each community
will have access to only those applications (refer to appendix C, for application details) that
are seen feasible for them, enabling every LINCOS project to have its distinct features
14It is a feasibility procedure for community assessments, implemented in LINCOS by Rochester
depending on the community requirement and CFRSD and its actor’s assessment report”
(LINCOSa [second-generation internal file] 2003).
Step 2: Construction and Installation Process 3: LINCOS Unit Construction.
As soon as the ‘Assessment and Community Selection’ takes place and the relevant
social and economic studies are initiated, the construction of a LINCOS unit begins.
Process 4: Unit Transportation.
Transportation will begin as soon as the first units are ready for shipping to their
respective countries/regions. However, prior to transportation, there must be a guaranteed
site selection that meets the criteria set in the original plans. Transportation includes packing
and sea or land transportation, unit arrival, local transportation to the sites, final deployment
on the selected site and the final tests.
Process 5: Community Selection of Administrative Organization and Site Preparedness.
Here, an “administrative” member based organization (MBO) needs to be selected
for the execution of the project as well as the coordinators working in different LINCOS’
applications by the community and the CRFSD with mutual consensus.
This activity also involves the identification of sites where the units are to be installed
for the selected communities. Besides this identification and preparation of the site, the
construction of necessary infrastructure such as restroom facilities, telephone wiring and tap
water among other activities are requested from the community.
Step 3: Economic Sustainability Process 6: Financial assistance.
At this stage, different entities interested in the project participate. Since ICT
projects are costly, the main financial actor is generally the government. Nevertheless,
operation and maintenance costs are generally covered by private actors including
companies, foundations and others (see tables 3.3 and 3.4 for costs information).
Step 4: Training, Assimilation and Use Process 7: Training
This process is done after Step 3 has been accomplished. Here the CRFSD provides
Process 8: Assimilation and use of LINCOS units
Once the previous steps are completed, LINCOS is put into operation by making
use of the different available applications chosen according to community needs.
Step 5: Monitoring aspects
Process 9: Monitoring and Evaluation
Regular evaluations are performed to ensure objectives of the project match with the
identified needs of the community. This facilitates better control over those activities that
take place along the project’s operation.
4.4 Required Resources for project Implementation:
As the financial process indicates, financial assistance must be requested to cover the
required costs in order to implement the project. Table 3.3 provides an estimation of the
base costs of LINCOS (initial fixed costs involved in the execution of a standard LINCOS
unit).
Table 3.3: Base LINCOS costs
Item Cost –in US$- Costs Unit construction $20 000
Cost of technologies (an average of 35 technologies such as equipment, labs, computer programs, material, etc) $25 000 - $60 000
Cost of the preliminary studies (RAP for the communities) $5000 Cost of training process (average of 6 one-month courses for
20 people) $20 000 - $50 000 Cost of the unit transportation to the site and customs duties $5000
According to table 3.3, the base cost to execute a LINCOS project, on average,
ranges from $82 000 to $150 000, depending mainly on the number of units installed, the
location of these units, transportation,15 lodging and training of the program’s technicians,
equipment and, most importantly, the number of applications involved (see table 3.2,
appendix C).
In addition, there are some operational (variable) costs that must be considered. The
most prominent operational costs are land rent/buy to install the unit, power supply costs,
internet access, and unit coordinators’ salaries (see table 3.4 for one unit costs).
Table 4.4: Other Operational Costs
Item Cost -in US
$-Personnel in charge of LINCOS unit 13,100
LINCOS Operator 4,800
Assistant for laboratory and video Conference 2,400
Assistant for heath, environment and Information 2,400
Technician 3,500
Publicity 3,500
Land cost 20,000
Operative Cost 3,100
Light 420
Water 240
Telephone 480
Internet 3,600
Supplies 420
Gardens 300
Maintenance 600
Other maintenance costs 240
Visitors 900
Transportation 900
Unexpected 5% 2,235
Total 46,935
Source: CRFSD 2000 [internal file - estimation for one community].
Because of the high costs involved, CRFSD has mobilized various national and
international actors to finance each LINCOS project. There are academic alliances such as
those with the Media Lab at the Massachusetts Institute of Technology (MIT), Rochester
School of Medicine’s Center for Future Health, the Harvard Center for International
Development, INCAE, Universidad de Costa Rica -the University of Costa Rica-, Universidad
Nacional de Costa Rica -the National University of Costa Rica and the Instituto Tecnológico de
Costa Rica -Costa Rican Institute of Technology (ITCR)- among others. In addition, there is
15 There is also the case that units can be installed outside the home country as it has been done in
also the contribution of different national and international companies and corporations,
which form part of the project’s strategic partners. To identify some of them, we can
mention the Hewlett Packard Corp., Microsoft Corporation, Alcatel, Motorola Co. and Banco
Nacional de Costa Rica –National Bank of Costa Rica-. There is also assistance from the
national government as which is an important actor and provides the physical infrastructure
that a community requires for the implementation of technologies. Lastly, the contributions
of some international foundations as the Discovery Channel Global Education Fund, the
Rockefeller Foundation, the Costa Rica – United States of America (CR-USA) Foundation
for cooperation, the AVINA Foundation and the Flora Family Foundation are part of this
project (LINCOS 2004).
These actors/project-supporters participate in different ways and their contributions
depend mainly on the type of application that the project is introducing. It should also be
noted that not all the actors mentioned above are necessarily involved in a particular
LINCOS project and that a donor contributing in one community or specific country may
not be part of another.
4.5 Selecting the Main Actors from the Project:
The participation of actors depends on the specificities of each step and the
processes required by those steps. Although every actor plays an important role, in this paper
we concentrate on those who have either provided significant academic assistance or a
substantial financial contribution to the project and can significantly influence in some way
the course of the project.
To justify the selection of certain actors from the project, an evaluation of their
contributions to LINCOS is presented below. First, a summary of these actors participating
Table 4.5: Primary Actors16
Steps Actors Involved Contributions
o In-kind
Financial
1. Introduction of the Project Center for Future Health at Rochester University and MIT.
o Rochester University: RAP designs and
faculty advisory for this component.
o MIT: Development and use of
Constructionist Methodology17.
Participation of master and PhD level students in the development of applications/technologies for communities.
2. Construction and Installation MIT, ITCR o MIT and ITCR with canopy designs and
container’ platforms construction. Computer (hardware/software) selection / approval.
3. Economic Sustainability CR-USA, BNCR, Discovery and State
CR-USA: Financial assistance for computers’ acquisition and others devices for the introduction of the first LINCOS second-generation concept in Rio Frío community.
BNCR: Funds requested for services’ provision.
Discovery Channel: Videos provision subsidies.
State: Dominican Republic Government provided the funds for their 18 LINCOS units.
4. Training, Assimilation and Use INCAE INCAE: Together with CRFSD, training
courses.
5. Monitoring aspects INCAE o INCAE: Impact evaluations and
business trainings.
Source: Author’ own construction by using the information presented in reports, Internet and other related sources to the project.
4.5.1 Donors Descriptions
After above selection, a description of the main donors is offered to give a better
idea of their objectives or mission.
16 It is important to note that the classification of actors presented in this table was the reality at the time of
writing this paper. It is possible that positions may have shifted from what they were in the past, or may change in the future, such that the actors may find they are misrepresented at a later time.
17 Proposed by MIT and it suggests that users construct –with available computer tools- meaningful
From academic Institutions:
The Technological Institute of Costa Rica (ITCR)
ITCR is a Costa Rican public institution of higher education in technology. It was
established in 1971, becoming the first technological university in Central America. Its
mission is ‘to launch strategic actions to consolidate its national and regional leadership in
the fields of technological education, innovation policies, and transfer of technology
focusing on productive sectors, regional projection, and potential international cooperation’
(ITCR 2004). ITCR became LINCOS strategic ‘partner’ a few months later after the CRFSD
initiated the idea in 1998.
The Central America Institute of Business Administration (INCAE):
In 1964, the business community and the governments of the Central America
founded INCAE. It is a private, non-profit, multinational, higher education organization
devoted to teaching and research endeavors in the fields of business and economics aimed at
training and instructing from a worldwide perspective. Its mission is ‘to actively promote the
comprehensive development of the countries served, enhancing leadership skills within the
key sector by improving management practices, attitudes, and values’ (INCAE 2004).
INCAE has been working with LINCOS since 2000 by given technical and monitoring
assistance. Thus, INCAE provides in-kind services to CRFSD instead of providing direct
financial assistance. For example, master and doctoral students from INCAE come to
CRFSD installations to carry out evaluations that in most cases are part of their research
papers.
The Media Laboratory at the Massachusetts Institute of Technology (MIT):
The MIT Media Lab is both an academic department and a research laboratory and
operations started in 1985. The research program is funded by over 300 of the world’s
largest companies, with a total volume of almost $30 million per year (LINCOSc 2003
[internal file]). The focus of this research has historically been human-machine systems, and
now explicitly includes a strong research agenda for sustainable development. The Media
The Center for Future Health at the Rochester University:
The center for future health is a collaborative effort of the School of Medicine at the
University of Rochester and the MIT Media laboratory (Rochester University 2004). It is
dedicated to the creation of a system of intelligent devices that can be used worldwide and
will enable people to monitor changes in their own health and compensate for physical
limitations. The center conducts research in a problem-centered and interdisciplinary way in
order to achieve personal health technology goals. The idea is that this allows progress to be
made in areas where solutions require such disparate expertise that standard research
approaches fail. Its objective is ‘to provide a platform of inter-operability on which to
develop a large array of health devices for personal use, permitting their clinical testing and
then allowing rapid transfer to industry’ (Rochester 2004). The center has joined the
LINCOS project in collaboration with the University of Rochester and MIT since year 1999,
one year after the project started.
From Companies/Corporations: The National Bank of Costa Rica
As a public bank, its mission is ‘to become the country’s financial partner by provision
of secure and excellent services’ (BNCR 2004). The bank emphasizes activities where it has a
clear competitive advantage. BNCR was ‘invited’ to become a donor of LINCOS by helping
with their funds to meet its operational costs in LINCOS, San Marcos de Tarrazú. This
contribution was to be mainly for the implementation of Discovery Channel videos.
From International Cooperation Agencies/ Foundations: Discovery Channel Global Education Partnership
Discovery channel recently –April, 2004- changed its name replacing “foundation”
with “partnership”, thus becoming Discovery Channel Global Education Partnership
(DCGEP). According to them, ‘the latter word more accurately states the nature of the
organization’ (Discovery Channel 2004). This is a non governmental organization, a public,
non-profit entity that works with partners and donors to bring to scale a grassroots
education project in order to make positive difference in under-served communities around
